NATIONAL DESK

Union Head Cites Secret Report in Quitting Insurer

By STEVEN GREENHOUSE (NYT) 526
words

December 3, 2002

The A.F.L.-C.I.O.'s president, John J. Sweeney, resigned
yesterday from the board of Ullico, an embattled union-owned insurer, because
of concerns that an outside counsel's report into accusations of insider
trading at the insurer might never be made public.

Mr. Sweeney resigned on the day that Ullico's board met in
Washington to consider an investigative report by James R. Thompson, a former
governor of Illinois, into highly profitable stock trades by members of
Ullico's board, which is made up primarily of former and current union
presidents. Mr. Thompson asked the board's two dozen members to sign statements
promising to keep his findings confidential.

But one board member said Mr.
Thompson's investigation into the stock trades severely criticized Ullico's
chairman, Robert A. Georgine, and called on union leaders to return their
trading profits. Ullico's proxy statements indicate that union leaders made
more than $6 million from the trades.

In recent weeks, Mr. Sweeney and
Mr. Georgine have clashed, with Mr. Sweeney demanding that the Thompson report
be made public and Mr. Georgine seeking to limit its disclosure. Mr. Sweeney,
who did not participate in the stock trades, has criticized them and was one of
the first to urge that an outside counsel be named.

A federal grand jury in
Washington, the Labor Department and the Securities and Exchange Commission are
investigating the stock trades in which several board members made more than
$200,000 in profits. Specifically, the grand jury is looking into the company's
sale of stock to its board members at $54 a share in December 1999, then its
repurchase of those shares at $146 each in November 2000, shortly before they
plunged in value to $74.

In his letter of resignation, Mr.
Sweeney voiced concerns that Ullico's board had not addressed whether the
Thompson report would be made available to the unions that own Ullico's stock.
He said he feared that he, as a board member, might be forced to withhold
important information from the insurer's union shareholders and thus violate
his obligations to the labor movement.

Saying Ullico had a “unique
mission and history of serving working families,” Mr. Sweeney wrote, “I
hope that Ullico responds to Governor Thompson's report in a manner that
assures the labor movement that Ullico remains true to its mission.” He
asked that the Thompson report be released to all of the insurer's
shareholders. The A.F.L.-C.I.O.'s executive vice president, Linda
Chavez-Thompson, also resigned from Ullico's board yesterday.

Thomas C. Green, a lawyer for
Ullico, said Ullico's board met yesterday to begin considering the Thompson
report. He added that the board created a special committee of directors who
did not participate in the stock trades to consider the report's
recommendations.

As for Mr. Sweeney's resignation,
Mr. Green said, “I'm personally disappointed that he elected not to
participate in the deliberative process of considering the governor's report.”